Kenya's apex bank cuts benchmark rate to combat COVID-19

0 Comment(s)Print E-mail Xinhua, March 24, 2020
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NAIROBI, March 23 (Xinhua) -- The Central Bank of Kenya (CBK) on Monday lowered the benchmark lending rate from 8.25 percent to 7.25 percent to combat the coronavirus pandemic.

Patrick Njoroge, CBK governor who chaired the Monetary Policy Committee (MPC) meeting in Nairobi, said the policy action was aimed at preventing the COVID-19 health crisis from becoming a severe economic and financial crisis.

"The MPC will closely monitor the impact of this change to its policy stance, as well as developments in the global and domestic economy, and stands ready to take additional measures as necessary," Njoroge said in a statement.

The apex bank also reduced the Cash Reserve Ratio (CRR) to 4.25 percent from 5.25 percent, releasing 35.2 billion shillings (about 330 million U.S. dollars) as additional liquidity availed to banks to directly support borrowers that are distressed as a result of COVID-19.

The apex bank said it will also ensure that the interbank market and liquidity management across the sector continues to function smoothly.

Njoroge said that the committee has decided to reconvene within a month for an early assessment of the impact of these measures and the evolution of the COVID-19 pandemic.

Njoroge said that as a result of the pandemic, Kenya's economic growth is expected to decline significantly in 2020, from a baseline estimate of 6.2 percent to possibly 3.4 percent, arising from reduced demand by Kenya's main trading partners, disruptions of supply chains and domestic production.

He observed that the current account deficit is projected at 4.0-4.6 percent of gross domestic product in 2020, but the outcome will depend on the duration and intensity of the pandemic, and its impact on exports particularly horticulture, transport and tourism services, and imports. Enditem

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